The Proposed Tax Reform in the Philippines is Bad News for Everybody

The Philippine Government has just proposed a tax reform that will review the tax system that was enforced 20 years ago, in 1997.

The major components of the reforms are:

an income tax cut for low-income earners and a tax hike for those with an annual income of $100,000 or higher, from 32% to 35%;

excise duties hike for oil products and cars worth over $12,000;

tax hike for sugar-sweetened beverages;

a broader base for the value-added tax.

As always the justification for such tax hikes is the need to improve the public infrastructure and support the welfare system.

Nonoy Oplas, from Minimal Government Thinkers, analyzed the implications of this tax reform and offered the arguments to refute any tax hikes.

More on, the philosophy of “demonize and overtax the rich, subsidize the poor forever” creates a moral hazards problem. The implicit message is: be careful if you wish to become rich because the government will silently demonize you and explicitly overtax you. Aspire to remain poor, poor forever if possible, because:

your minimum wage income plus bonuses will be tax-free

you get lots of freebies and subsidies, and

there is no due date: subsidies and transfers will go on forever as they get transferred to your children and grandchildren.